Where to save/invest $4.7k per month for next 10 years

[confused1]

Hi All

My wife and I are starting to think about early retirement in around 15 years time, when we are 55. As part of this plan we would like to be in a position to pay off our mortgage in 10 years time, obvisouly if it were to make sense to keep the mortgage for tax etc reasons then we may keep it but we would like cash/investments equal to the remaining mortgage amount.

Emergency funds: Yes, most in Ally CDs and 20% held in Ally savings account
Debt: $880k on mortgage at 3.75%
Tax Filing Status: Married Filing Jointly
Tax Rate: 35% Federal (expected under new system), 11.3% State
State of Residence: CA
Age: 40

Our overall retirement accounts are slightly complex as we have overseas pensions but in the US we are doing all of the right things
401k - Both max out $18k contributions and company match invested in low fee Vanguard and Fidelity funds.
Backdoor Roth - Both contribute the max each per year and have done for the past 3 years, both invested in low fee Vanguard Funds.

At a high level we need to save ~$4,700 per month for the next 10 years with a 3.5% return to accumulate ~$700k, this would match the mortgage balance and meet our goal.

Now what I am not sure about is where to save/invest this money. If our time horizon was 5 years then we would probably keep it in CDs to minimize the risk of drops etc but at 10 years that is probably too conservative.

Any thoughts on where to invest this?

Thanks
Confused

[DorothyB]

Why not just make extra payments on the mortgage? Then you won't have to pay tax on the gain and the return is a guaranteed 3.75%

[confused1]

That’s the other option! Our only concern is that does not keep the investment amount liquid, not that we have a need for it currently.

Why not just make extra payments on the mortgage? Then you won't have to pay tax on the gain and the return is a guaranteed 3.75%

[ThePrince]

That’s the other option! Our only concern is that does not keep the investment amount liquid, not that we have a need for it currently.

Why not just make extra payments on the mortgage? Then you won't have to pay tax on the gain and the return is a guaranteed 3.75%

Liquidity needs should be met by your emergency fund. It’s not a pet, work to pay the mortgage off.

[birdog]

I would maintain the emergency fund and continue to fund the retirement accounts and very aggressively throw any extra money at the mortgage to eliminate it as soon as possible. Don’t try to make it complicated.

[chevca]

If there's no need for liquidity, just attack the mortgage. If a liquidity need arises, stop paying extra on the mortgage and/or the EF. Keep it simple.

Personally, I wouldn't invest hoping for 3.5% when there's a 3.75% mortgage sitting there.

[Agggm]

Hi All

My wife and I are starting to think about early retirement in around 15 years time, when we are 55. As part of this plan we would like to be in a position to pay off our mortgage in 10 years time, obvisouly if it were to make sense to keep the mortgage for tax etc reasons then we may keep it but we would like cash/investments equal to the remaining mortgage amount.

Emergency funds: Yes, most in Ally CDs and 20% held in Ally savings account
Debt: $880k on mortgage at 3.75%
Tax Filing Status: Married Filing Jointly
Tax Rate: 35% Federal (expected under new system), 11.3% State
State of Residence: CA
Age: 40

Our overall retirement accounts are slightly complex as we have overseas pensions but in the US we are doing all of the right things
401k - Both max out $18k contributions and company match invested in low fee Vanguard and Fidelity funds.
Backdoor Roth - Both contribute the max each per year and have done for the past 3 years, both invested in low fee Vanguard Funds.

At a high level we need to save ~$4,700 per month for the next 10 years with a 3.5% return to accumulate ~$700k, this would match the mortgage balance and meet our goal.

Now what I am not sure about is where to save/invest this money. If our time horizon was 5 years then we would probably keep it in CDs to minimize the risk of drops etc but at 10 years that is probably too conservative.

Any thoughts on where to invest this?

Thanks
Confused

Put it in your AA.

[confused1]

Thanks all - will contact the mortgage company today.

[sco]

Thanks all - will contact the mortgage company today.

About what?

[sometimesinvestor]

I would be bolder given the long time period, Invest one year (12 x4.7k)in 40% s+p 500 + 60% in california tax free for the next 6- 8 years. If the market seems high then sell out and buy individual tax free bonds and CDs as appropriate maturing when you need the money. If the market does not seem risky continue fora while.
Pay off the mortgage with the other money 4.7k for the other years This may also be a spot for i bonds

[confused1]

Thanks all - will contact the mortgage company today.

About what?

Just checking how to make the overpayments and ensure they are correctly applied.

[sco]

Thanks all - will contact the mortgage company today.

About what?

Just checking how to make the overpayments and ensure they are correctly applied.

Do you pay online or with a check/coupon?

Always good to check I supposed, but normally there is an option for "Apply to principal".

What I do I do an electronic payment for the month, and then a 2nd for an amount that I want to apply directly to principal. Some places have an option to pay the next due payment + a principal amount in one transaction, at least online..

[confused1]

Thanks all - will contact the mortgage company today.

About what?

Just checking how to make the overpayments and ensure they are correctly applied.

Do you pay online or with a check/coupon?

Always good to check I supposed, but normally there is an option for "Apply to principal".

What I do I do an electronic payment for the month, and then a 2nd for an amount that I want to apply directly to principal. Some places have an option to pay the next due payment + a principal amount in one transaction, at least online..

Automatically paid online, option to either add additional payment to principle as part of monthly payment or separate transaction/payment.

Reason for double checking is that we are from Europe originally and mortgage terminology is different. Wanted to double check how it all worked.

[sco]

Thanks all - will contact the mortgage company today.

About what?

Just checking how to make the overpayments and ensure they are correctly applied.

Do you pay online or with a check/coupon?

Always good to check I supposed, but normally there is an option for "Apply to principal".

What I do I do an electronic payment for the month, and then a 2nd for an amount that I want to apply directly to principal. Some places have an option to pay the next due payment + a principal amount in one transaction, at least online..

Automatically paid online, option to either add additional payment to principle as part of monthly payment or separate transaction/payment.

Reason for double checking is that we are from Europe originally and mortgage terminology is different. Wanted to double check how it all worked.

I didn't catch that immediately.. Mortgage is written in the states?

Just throw in $200 and see how it is applied, worst case it goes to the last payment and then you know?

[triceratop]

That’s the other option! Our only concern is that does not keep the investment amount liquid, not that we have a need for it currently.

Why not just make extra payments on the mortgage? Then you won't have to pay tax on the gain and the return is a guaranteed 3.75%

Once you put the amount into your house after 10 years it will not be liquid either. If your concern is about liquidity maybe your house value is too high a percentage of your net worth? Of course, maybe not too.

[confused1]

I didn't catch that immediately.. Mortgage is written in the states?

Just throw in $200 and see how it is applied, worst case it goes to the last payment and then you know?

Mortgage is US based.

Just did exactly that today, best to check before dropping larger amounts in!

[confused1]

That’s the other option! Our only concern is that does not keep the investment amount liquid, not that we have a need for it currently.

Why not just make extra payments on the mortgage? Then you won't have to pay tax on the gain and the return is a guaranteed 3.75%

Once you put the amount into your house after 10 years it will not be liquid either. If your concern is about liquidity maybe your house value is too high a percentage of your net worth? Of course, maybe not too.

Dont think we have a concern with liquidity, there are no obvious situations we can think of where the liquidity would be needed.